To qualify for the incentive, customers must install equipment that is sized to meet all or a portion of their on-site load. Only new commercially available permanently installed generating equipment qualifies for incentives. The following items do not qualify for the CHP Incentive Program: used, refurbished, temporary, pilot, demonstration, or back-up generation.

The System must achieve an average annual fuel efficiency of at least 60%, based on total energy input and total utilized energy output. Mechanical energy may be included in the efficiency evaluation.

Waste heat utilization systems or other mechanical recovery systems are required. Even though waste heat systems are produced with many configurations, they all perform the same task of capturing waste heat energy in the radiator or exhaust systems of a generator and delivering it to a heat load or cooling load. The captured energy is used in heating processes, such as water heating, pasteurizing, product preheating, etc. New electric generation equipment which captures waste heat or energy from existing systems is also allowed.

An on-site power system should have the ability to island/disconnect from the utility in the event of substantial grid congestion or failure.